Retirement Planning Flashcards
7 cards from real CRC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Retirement Planning flashcards as text
Which of the following correctly describes a 'dynamic withdrawal strategy' in retirement?
Answer: Adjusting annual withdrawals upward or downward based on portfolio performance and spending needs
A dynamic withdrawal strategy adjusts spending in response to market performance, reducing withdrawals in down markets and potentially increasing them in up markets.
A retiree has a $1 million portfolio and withdraws $40,000 in year one, adjusting for inflation each year. This most closely describes which withdrawal strategy?
Answer: The 4% rule
The 4% rule states that withdrawing 4% of the initial portfolio and adjusting for inflation annually has historically sustained a 30-year retirement.
Long-term care insurance premiums are generally tax-deductible as medical expenses subject to which limitation?
Answer: They are deductible up to age-based limits as part of qualified medical expenses exceeding 7.5% of AGI
Qualified LTC insurance premiums are deductible as medical expenses up to age-based annual limits, but only to the extent total medical expenses exceed 7.5% of AGI.
A 457(b) plan is distinct from a 401(k) in that early distributions prior to age 59½ from a governmental 457(b) are:
Answer: Not subject to the 10% early withdrawal penalty
Governmental 457(b) plans do not impose the 10% early withdrawal penalty that applies to 401(k) and IRA distributions before age 59½.
In estate planning for retirement accounts, which beneficiary designation allows the longest potential stretch of tax-deferred growth?
Answer: An eligible designated beneficiary using their own life expectancy
Eligible designated beneficiaries (such as surviving spouses, minor children, disabled individuals, and those within 10 years of the deceased's age) can still use life-expectancy distributions, maximizing tax deferral.
Which of the following is TRUE about Health Savings Accounts (HSAs) in the context of retirement planning?
Answer: After age 65, HSA withdrawals for non-medical expenses are subject to ordinary income tax but no penalty
After age 65, HSA funds can be withdrawn for any reason; non-medical withdrawals are taxed as ordinary income but avoid the 20% penalty that applies before 65.
A client is considering an immediate annuity and is concerned about inflation eroding their income. Which annuity feature addresses this concern?
Answer: A cost-of-living adjustment (COLA) rider
A COLA rider increases annuity payments annually by a fixed percentage or in line with CPI, providing inflation protection over time.